Downfall of a black syndication Kingpin: driven into bankruptcy, The Heritage Networks struggles to regain its footing without ex-CEO Frank Mercado-Valdes

Black Enterprise, April, 2005 by Dahna M. Chandler, Derek T. Dingle, Alan Hughes

As of the bankruptcy petition date, Alto-Marc owned 54% of the renamed THN; Cottrell, 35%; Wiley and Alfred Baker, former executives of Pro-Line International, which Cottrell founded, owned 5% each.

Records also show that THN owes Cottrell $4.1 million. To recoup his funds, Cottrell placed liens on Mercado-Valdes' properties, forcing the sale of his condo in Florida and netting $380,000. The Trump Tower and Woodstock homes are up for sale at approximately $1.2 million and $1 million, respectively. Stone Canyon has since flied a lawsuit against THN, seeking damages for alleged fraud, deceit, conspiracy, and misrepresentation in their loan transaction.

Stone Canyon, meanwhile, is not happy with the fact that Cottrell was named senior creditor and would get paid first. The firm asserts specifically that THN's amended plan of reorganization made Cottrell's creditor claim first priority, while unsecured creditors received 20% of the portion of their $13.1 million in claims, which was to be paid in the form of a term note payable in three years at 7% interest, provided the company survives that long.

Bankruptcy court documents show that THN's other creditors include vendors of the television production equipment, computers, and office furniture that former staffers on the Livin' Large production set saw repossessed, shutting down the show's posh Wilshire Boulevard offices last November. Also according to court documents, THN owes more than $2 million to former employees and employees of its subsidiaries, which include the production companies formed specifically to produce its shows. Staffers of Heritage 215, which produced Livin' Large in Los Angeles, and Heritage 215 II, which produced Weekend VIBE in New York, have filed state wage claims against THN. The company also owes the IRS nearly $12,000 in back taxes for unpaid payroll taxes for Livin' Large employees.

Independent production companies, ad agencies, and show talent weren't spared either. Stevie "Black" Lockett, former Mike Tyson camp coordinator, movie producer, and co-creator of Livin' Large, warns anyone against working with Mercado-Valdes, who he says "doesn't play fair." Bankruptcy records show that THN owes Lockett more than $100,000. The show's other creator, famed concert promoter and straight-to-DVD movie producer Jeff Clanagan, former host Carmen Electra, and producer Suzanne de Passe, are also owed more than $1 million collectively.

Court records reveal that THN cut off health insurance benefits and 401(k) matching funds to longtime employees, one of whom has filed an $187,500 proof of claim against the company for failing to make good on 401(k) payments. At the same time, Mercado-Valdes was publicly generous, giving a $1 million donation to Florida A & M University.

Can Mercado-Valdes' replacement turn the troubled company around? It's still anyone's guess. At the outset of THN's bankruptcy troubles, officials outlined a 100-day turnaround plan to "right-side" and stabilize the company, which may have already been instituted by Walker. Walker remains involved in bankruptcy proceedings for Hookt.com, which had its case converted to Chapter 7 liquidation in 2003. Yet, Walker, who is getting paid $19,000 a month for his turnaround expertise, is convinced that he can achieve a different result for THN.